Business
Need For Efficient Privatisation In Nigeria
In Nigeria there have been
many years of exhaustive deliberations by governments and stakeholders on how to put the country’s economy on the path of sustainable growth and development. This informed the inauguration of the National Council on Privatisation (NCP) on July 20, 1999 in Abuja by the Federal Government under former President Olusegun Obasanjo. The inauguration was a critical step in the nation’s socio-economic agenda and a demonstration of its commitment to institutional reforms.
In the past, it was considered sound economic policy for government to establish and invest in statutory corporations and state-owned companies since socialism existed side by side with capitalism. At that time, it was argued that public-owned companies were better for stimulating and accelerating national economic development than private firms. This brought about the proliferation of state-owned enterprises covering a broad spectrum of economic activities.
These enterprises include steel plants, petro-chemicals, NEPA, NITEL, Banks, Airways, Petroleum refineries, telecommunication, among others. Previous Nigerian governments had invested huge amount of naira in public-owned enterprises which yielded less returns. In many cases, the huge losses are charged against the public treasury. With declining revenue and escalating demand for effective and affordable social services, the citizens and the general public are yearning for state-owned companies to be more efficient and viable, thereby called for the privatization of the enterprises.
Government enterprises suffer from fundamental problems of defective capital structure, excessive bureaucratic control or intervention, inappropriate technology, gross incompetence and mismanagement, blatant corruption and crippling complacency which monopoly engenders. Inevitably, these shortcomings take a heavy toll on the national economy.
It is on this basis that an economist, Professor Vincent Momoh called for total privatization of all sectors of the economy to pave way for free market economy and competition.
Speaking on a radio interview programme recently, Momoh said that government was not a good businessman and had never fared well in business, and as such ought to hands-off from running businesses, which can be better managed by private persons. According to him, even the Nigerian National Petroleum Corporation (NNPC) has nothing to do with importation and marketing of petroleum products in the country.
He said that duty should be handed over to private corporate groups that can do it better. Citing example with the telecommunication industry, which government had not fared well, Momoh noted that the M-Tel Mobile Communication firm that was floated by Federal Government could not survive or compete among other companies. This is simply because as he put it, government can’t do well in businesses, adding that the present economic challenges in the country, including employment would greatly be tackled through privatization of all sectors. “Government should only create conducive environment and security, and provide social infrastructure”, he said.
However, the problems associated with state-owned enterprises and monopolies are not peculiar to Nigeria. For example, with the establishment of communist governments in sixteen countries during the 20th century, those in Europe spent the 1900s in a massive move privatizing firms that had been owned and run by the state. British Prime Minister Margaret Thatcher privatized two dozen firms over a period of twelve years.
Many developing countries have overcome the problems through a well-designed and single-minded pursuit of privatisation programme with the rationale that privatization permits governments to concentrate resources on their core functions and responsibilities, while enforcing the rules of the game so that the markets can work efficiently. With the provision of adequate security and basic infrastructure, as well as ensuring access to key services like education, health and environmental protection, a new synergy between a leaner and more efficient government and a revitalised, efficient and service-oriented private sector will be affected.
In the case of Nigeria, there are overwhelming facts and figures in support of the absolute necessity to realign with global trends. There were over 1,000 state-owned enterprises in Nigeria many of which gulped billions of naira without yielding much positive results in terms of customers satisfaction. It is conservatively estimated that the nation may have lost more than N800 US dollars due to unreliable power supply by the power sector and more than 440 million dollars through inadequate and inefficient fuel distribution. These figures are not even adequate to tell the whole story of the government’s inability to run public companies. In some cases, lives of people working in state-owned firms were lost without commensurate compensation.
For the benefit of our economic recovery and social life, more government –owned firms need to be privatised. With the privatisation of the telecommunication industry that ushered in MTN, GLO, and other service providers, at least Nigerians are enjoying the benefit of the policy. No matter the seemingly epileptic electricity supply, Nigerians are experiencing after the privatization of the power sector, it is believed that with time, the situation will improve. The privatization was not intended to please any particular sector, World Bank nor the IMF or was it to share our national assets to a few rich people. It is not also to replace public monopoly with private monopoly rather it is a determination to be uncompromising in the pursuit of the best interest of this country.
That was why former President Obasanjo during the inauguration of National Council on Privatisation said, “we want to remove the financial burden which these enterprises constitute on the public and release resources for the essential functions of government. We want to ensure that many more service providers are brought into compete and thereby regulate the market for fairer pricing. We want to ensure that these utilities work and deliver quality services”.
According to him, the privatisation process will avoid any possibility of further hardship to the public, pointing out that a vigorous public enlightenment would ensure that as many Nigerians as possible do participate in the programme. Privatisation, Obasanjo noted, was also one of the reforms we have to undertake to integrate our economy in to the mainstream of world economic order. For any privatisation exercise to succeed, Nigeria needs the technology, the managerial competence and the capital from the developed world to enhance the performance of our utilities linkages between the efficient functioning of our utilities and our ability to attract foreign investments.
We cannot be talking about creating a conducive environment for foreign investments if the performance of our transport, telecommunication, road network and energy sectors remain dismal and epileptic. So, the critical issue is how we can carry out a privatization programme that is efficient, well designed, properly coordinated and sequenced, credible and widely acceptable. This is where the NCP has a pivoted role to play as the apex body on privatisation and choice of strategic investors.
Others are to approve public enterprises to be privatized or commercialized, approve the prices for shares or assets of the public enterprise to be offered for sale and approve the appointment of privatization advisers and consultants. Any privatization process done now will be a continuation since some work had been done by previous administrations. And to do this, we should re-examine the previous ones, our pool of knowledge and experience as well as draw from other countries that have successfully privatized their state-owned enterprises.
We must have an overview of previous exercises to know if they promote the integrity and transparency of our privatization exercise before they will be adopted and built upon. As a first step, we should dispose of government equities quoted on Stock Exchange in the relevant enterprises or companies, which are relatively easy to evaluate. In doing so, the absorptive capacity of the market must be closely watched and efforts made to encourage core investors to take preferential allocation. A lot of work need to be done in any process of privatising more state-owned companies or agencies such as the petroleum/oil sector, fertiliser companies, machine tools, steel and aluminum, mining and solid minerals sector, insurance companies, transport and aviation companies, paper companies, and so on.
In view of the importance of privatization in any given economy, nation or international community, it is pertinent to ensure the efficacy and sincerity of all the major public sector reforms we have so far undertaken. We must make sure that the design and implementation of our privatization programme gives practical meaning and illustration to the redefined role of government as an enabler, as well as our commitment to transparency and accountability.
Shedie Okpara
Some Commercial drivers in Port Harcourt have said that the Federal Government’s N1,350 fuel discount is yet to reduce their daily operating cost.
A cross session of commercial drivers who spoke to The Tide correspondents in Port Harcourt said they are yet to feel the impact of the government discount, adding that most filling stations in the city are even selling above the pump price
A driver Jude Ogbo who operates the mile 1 Rumuokoro axis of Port Harcourt said plies the discount has not reflected in his daily fuel expenses.
“Since the discount was announced, many filling stations still sell at the old price. When you go there, you discover they sell you two litres at the price of one. For now, we have not seen any reduction,”_ he said.
Another commercial driver, Comrade Ishmael Uzeho who operates within the Port Harcourt metropolis, said the discount is not being implemented across the country.
“How has the discount affected us? I will say it has not. Many stations are not working. Only NNPC is working and that is just one person in the whole country. If government really wants to help, let the fuel price go down properly,”_ he said.
Uzeho added that if the price of fuel goes down, transport fares will also go down. He noted that his route fare has remained at N500.
On his part, Mr. Moses Dapa, Supervisor at Sam Jaja Foundation Transport Company, said the company has not increased its fares despite the high cost of fuel.
“We are still running normal price. We charge N2,000 and N5,000 depending on the destination. We will not increase our price. I don’t know about other parks, but for Sam Jaja, we are maintaining normal price,”_ Dapa said.
He appealed to passengers to understand that drivers are not using high fuel price as an excuse to charge excessive fares.
Other drivers who spoke said the federal government should monitor the NNPCL retail stations to ensure that the directive is implemented.
Recalled that The Federal Government in abid to reduce transportation cost in the country had announced a 30-day margin discount at NNPC Retail stations across the country from October 1 to 31,
However investigation revealed that the policy is yet to affect transportation cost in the country.
By; Stephens Sopakriba and Saint Davies
In a press statement released to The Tide’s source on Friday in Abuja, the group said Nigeria had a significant resource advantage due to its vast natural gas reserves.
“At a time when global energy markets face unprecedented volatility and rising operational costs, Nigeria stands on a massive resource advantage with its vast natural gas reserves,” the group said.
Highlighting this potential, Alfa Designs urged the nation to move past complaints over energy costs and aggressively embrace Compressed Natural Gas (CNG) as a sustainable engine for economic growth.
While federal policy adjustments have sought to cushion the impact of global energy shocks, industry experts emphasised that long-term relief hinges on a rapid, nationwide transition to gas.
“Transitioning away from expensive traditional petroleum products promises to ease the financial burden on ordinary citizens.
“It will also reposition Nigeria as an attractive industrial hub capable of drawing foreign direct investment and driving job creation,” it said.
To demonstrate the practical feasibility of this transition, the group said it recently partnered with a global Original Equipment Manufacturer (OEM) to lower the entry barriers for commercial drivers.
“By negotiating directly with the manufacturer, we reduced the total cost of acquiring and installing a CNG conversion kit for commercial tricycles (commonly known as Keke NAPEP) from up to N700,000 down to under N450,000.”
The group said this shift offers dramatic immediate financial benefits for local operators, with petrol currently selling at roughly N1,390 per liter.
It said that, in comparison, at a CNG equivalent price of about N98 per liter, a daily commercial driver using 10 liters of fuel reduces its daily energy expenditure from N13,900 to N3,980.
“This represents a daily net savings of N9,920, or more than 71 per cent.
“Over a standard 26-day working month, drivers save over N257,000, allowing them to fully recover the cost of the CNG conversion in less than 46 operational days.”
The company further stated that when scaled nationally, the economic implications are monumental.
“Nigeria consumes approximately 50 million liters of gasoline daily, costing roughly N69.5 billion per day.
“A nationwide 71 per cent reduction in fuel expenditure would generate daily national energy savings of N49.6 billion.
“On an annualised basis, this shift equates to approximately N18.1 trillion, or $13.5 billion, kept within the domestic economy.”
The group added that those recurring national savings would offer a vital mechanism to help address Nigeria’s estimated $2.3 trillion infrastructure deficit.
It said reinvesting those funds into the economy helps eliminate the 30 to 40 per cent operational overhead currently consumed by imported fossil fuels.
“The resulting boost to corporate margins expands the national tax base, generates reliable user-fee revenues to make major transit projects bankable, and creates a self-sustaining financial cycle,” it said.
